Can they make a significant difference? DOOMSDAY SCENARIOS OF the world's oil supplies reaching a peak and then declining have helped to fuel financial speculation in crude oil and driven prices to record highs. They have also helped to raise expectations that alternative sources of energy - everything from ethanol and biodiesel to nuclear, solar, wind and coal - can provide substantial new supplies in the coming decades. But new research shows that such scenarios and expectations are misplaced. While the use of alternative fuels will grow significantly, it will fail to keep pace with global rises in demand. As a result, the world will need more, not less, crude oil, especially from Saudi Arabia and other Opec producers, as well as much more natural gas.

At present, the world's main energy comes first and foremost from oil, which provides just over a third of the total. Coal accounts for about one-fourth, followed by gas at one-fifth. Alternatives to fossil fuels include biofuels, nuclear energy, solar, wind and hydro- electric power and other "renewable" energies. Of these, biofuels are the most important, accounting for about 10% of current global energy use, according to figures produced by the International Energy Agency (IEA) in Washington D.C.

The World Bank had already estimated earlier this year that 100m people have been pushed below the poverty line because of the big jump in food prices. Many of these are in the Arab world, in countries such as Egypt - the world's number one importer of wheat - Jordan, Iraq, Yemen, Algeria, Morocco and Mauritania. Kemal Dervis, the head of the United Nations Development Programme (UNDP) and former Turkish economy minister, said in May that the urban poor in the developing countries were facing an "inflation tsunami", mainly from soaring food prices, which had made them up to 25% poorer in less than a year.

The World Bank's study has not yet been released officially, and there are suspicions that its publication has been held up since April because it might embarrass the Bush administration, the London Daily Telegraph reported in early July. The US secretary of Agriculture, Ed Schafer, had maintained in June that the production of biofuels contributed less than 3% to the recent rise in world food prices.

His remarks came in Rome, at a summit of the Food and Agriculture Organisation (FAO) at which its director-general, Jacques Diouf, attacked the Bush administration and other western governments. "Nobody understands," he argued, "how 11 to 12bn dollars a year in subsidies in 2006, and protective tariffs, have had the effect of diverting 100m tonnes of cereals from human consumption, mostly to satisfy a thirst for fuel for vehicles."

Diouf was referring to the annual cost of subsidies paid by the US government to its farmers to produce ethanol from corn and maize, and to the fact that the production of ethanol derived from corn in the US had risen nearly threefold in just four years, from 3.5m gallons in 2004 to an estimated 9m gallons this year. That compares with a rise in the global production of biofuels of just over twofold, from 8m gallons in 2004 to about 18m gallons in 2008, according to estimates produced by the University of Minnesota. By the end of this year, its researchers forecast, ethanol production in the US could consume 30% or more of the country's entire corn crop. Given that the US is the world's most important exporter of grains and other foodstuffs, this diversion of land to produce fuels means that there is both less corn to export as well as other staples, such as wheat and soyabeans that are diverted to other purposes, such as feeding animals to produce meat.

"Biofuels are responsible for 30m more people going hungry in the world," Benjamin Senauer, Professor of Applied Economics at the University, has said, adding that if the World Bank figures are correct, the figure could be far higher. Of this 30m, he estimates that some 2.4m are children aged under five years, of which up to half could die due to malnutrition by the end of this year.

The World Bank's critical assessment follows others from respected global institutions. The International Monetary Fund, in contrast to Schefer's estimates, says that biofuels are responsible for up to 30% of the rise in world food prices. An FAO document prepared for the summit in June maintained that: "Biofuels accounted for 59% of the increase in the global use of coarse grains and wheat between 2005 and 2007, and 56% of the increase in vegetable oils." For households and families in many parts of the developing world, who are dependent on bread and cooking oils for a large part of their calories and dietary needs, this diversion of agricultural production from foods to fuels has produced not only higher costs but shortages that have made the difference between basic nourishment and hunger, several international aid agencies have pointed out.

Yet another study, commissioned by the UK government earlier this year, calls for a complete reassessment of current US and European policy on the cultivation of biofuels to replace petrol, diesel and other fossil fuels. Chaired by Professor Ed GaIlagher, head of Britain's Renewable Fuels Agency, a panel of experts concluded that the rush to develop biofuels had played a "significant" role in the dramatic rise in global food prices.

"Simply setting a target [to reduce reliance on petrol and other transport fuels] without stipulating what kind of biofuel is to be used, in what circumstances, can have all sorts of unintended consequences," a source close to the panel told the media in June.

The report, while recognising the potential role of biofuels as an alternative to fossil fuels, says a distinction should be drawn between "first-generation" biofuels which use food crops such as corn, palm and soya and "second-generation" fuels based on fibrous non-food plants. These "second generation" crops include the sugar cane waste used by Brazil - one of the world's earliest and largest producers of ethanol - which could be grown without displacing food crops, thereby minimising their effect on world food prices.

Calls to scrap the US federal requirement to use 36bn gallons of ethanol by 2022 are also mounting, according to reports from Washington. Even if implemented, the target would only meet around 10% of the country's current demand for transport fuels, at the cost of driving up food prices. Corn ethanol, campaigners in the US maintain, also emits more carbon dioxide, while producing a third less energy per gallon of fuel, than petrol derived from crude oil.

But fuel demand goes beyond that needed for transport. Global financial analysts have noted that the US is currently the only major industrialised nation in which overall oil consumption, for home heating, air conditioning, industrial use, electricity generation and agriculture has surged since the global oil shocks of the 1970s and early 1980s. This, they say, can be partly explained by the fact that the US has some of the lowest petrol prices in the world, the least fuel-efficient cars, the lowest energy taxes and the longest daily car commuting times of any industrialised nation.

As a result, The New York Times reported in April, about a quarter of the world's oil goes to the US every day. More than half of this goes to provide transport fuels for cars and trucks.

Elsewhere in the world, China, one of the most rapidly growing economies in the world, is building new, highly polluting coal- fired power stations at a phenomenal rate to keep up with its industrial expansion. But it also has a large wind-generating capacity, which is expected to grow by twothirds this year. China is also the world's second-largest manufacturer of solar panels, not to mention having the largest number of solar-heated rooftop, hot- water systems in its buildings.

Solar, whether from panels, photo-voltaic cells or mirrors, is expected to become far more economical in price and to expand rapidly across the globe. Mass production, for export, could come from North Africa, where both Algeria and Morocco are installing huge experimental solar fields to provide energy both for domestic use and for export to Europe.

Wind energy is also expanding rapidly, with substantial investments from the private sector. T. Boone Pickens, one of the US's most renowned oilmen and investors, has decided to build a $2bn wind farm in Texas. General Electric plans to sell $6bnworth of wind turbines this year, assuming that by 2020 some 15% of the US electricity needs will be generated from wind, a figure that is close to that which is expected from nuclear power.

But both solar and wind, despite the falling prices for their equipment, carry risks. Reliability is a particular issue; the sun goes out at night and, if the wind does not blow, there's no electricity generation. While energy experts say that these problems can be overcome in the future by linking grids from one area to another, there is still the question of cost, not least because of storage overnight in the form of heat for solar and of linking wind turbine farms built by different, perhaps competing, entities. Cost is also a factor for China, India and other developing nations seeking to find ways to build more costly, environmentally-friendly power stations. Recent research at Stanford University in the US shows that the global system of carbon credits which has subsidised the construction of new natural-gas fired power plants, which are less polluting than coal, or of hydro-electric and other alternative- fuelled power stations in emerging countries, as well as in parts of the former Soviet Union and Eastern Europe may be called into question. Under the terms of the Kyoto treaty on climate change, such credits can only be given if they reduce carbon emissions in addition to those that would have been taken without the project. And this, the Stanford researchers say, is difficult to prove. In fact, they add, most of these would have been built in any case, thereby eliminating their eligibility for global subsidies under the emissions reductions scheme.

At the end of the day, while alternative energies are here to stay, and will grow as a result of cost reductions, there are few substitutes for petrol, aviation and other transport fuels derived from crude oil, or for natural gas, which, while still a fossil fuel, is less polluting than oil or coal.

Petroleum, the dominant fuel of the 20th century, will remain the top energy source. Refined into petrol, kerosene or diesel fuel, oil has no viable substitute as a transport fuel. A situation that is not likely to change much in the next 30 years. Aside from transport fuels, the world's energy demand, including oil, coal, natural gas, nuclear power and renewable energy sources such as solar, wind and hydro-electric generation, is set to rise by 65% over the next two decades, the IEA predicts.

But, given the increase in demand for transport fuels for cars, trucks and airplanes, oil remains a significant part of world demand. In fact, it says, oil consumption will jump by 35% by 2030. oil producing countries, it adds, will need to find and pump an additional llbn barrels every year.

Given that 2030 is only 22 years away, it appears that Saudi Arabia and other Opec producers will face increasing pressure to invest in, and exploit, their underground reserves. But given that the higher the oil price rises, the more it makes sense to produce less, rather than more, saving as much as possible for future generations, Opec producers may decide to resist such pressures.

And, while Saudi Arabia and other Arab oil producers such as Kuwait, Qatar and Abu Dhabi are anxious to prevent further global economic turmoil, not least because such turmoil endangers their own multibillion dollar investments in the West, the world's main oil consuming countries, especially the US, cannot expect Opec to have endless patience, especially when a falling US dollar is a major contributor to the rise in energy prices, as well as other commodity prices such as wheat, rice, soyabeans and steel.

In the end, it may be that conservation of energy, whatever its source, is the best answer. And, in this regard, the signs are more promising than might be expected. Even in the US, the world's biggest oil consuming country by far, petroleum-product use is falling by 2% or more. Aviation fuel is down even more, by 4%, according to reports in the American media, while yearon-year gross oil imports, including from Opec, are down by 2.7%.

That could mean that oil prices start to fall later this year, or that, at minimum, their rise begins to moderate. If so, Opec producers will be pleased, despite what many analysts and observers may expect. The rise in global demand will continue to underpin Opec revenues, but at a lower cost per barrel, the risk of global economic and social turmoil will be lessened. At the same time, the prospect that oil prices will never return to levels below $100 a barrel or so should, experts say, underpin the continuing search for viable, sustainable alternative energies.

Brazil's use of sugar cane to produce ethanol has put It at the forefront of blofuel development

Hopes in the main consuming countries that the cultivation of crops to produce biofuels - mainly ethanol produced from crops such as corn, palm, sugar cane and soya - could help to replace expensive crude oil imports have been dashed in the past few weeks. A study by the World Bank was reported in June to have concluded that biofuels, including ethanol, have been responsible for 75% of the estimated 140% rise in world food prices between 2002 and last February. Droughts in some of the main grain growing areas of the world, such as Australia, the report said, were not a major factor in the huge rise in food costs. And it rejected US claims that income growth and increased demand in developing countries such as China and India were to blame. "Without the increase in [the cultivation of crops for] biofuels, global wheat and maize stocks would not have declined appreciably and [food] price increases due to other factors would have been moderate," the report states, according to media sources in London. Higher prices for energy and for fertilisers, the study added, accounted for an increase in food prices of only 15%.

aWhile alternative energies are here to stay, and will grow as a result of cost reduction, there are few substitutes for petrol or for natural gas

By the end of June, the mounting evidence about the dangers of replacing the cultivation of foods with those for fuel had begun to lead to a re-think in both Europe and the US about government targets for using biofuels as a substitute for fuels derived from petroleum and gas. The European Union (EU) had been contemplating measures to insist that 10% of all petrol and diesel consists of biofuels by 2020, a plan that has now come under intense debate in Brussels and in the European parliament. At present, more than the 40% of the EU's production of vegetable and other cooking oils goes to the production of biofuels, substantially reducing the amount available both for domestic food consumption and for export. Conservationists and others are also raising their voices against the EU plan. "Finding enough land to grow 10% of Europe's transport fuel will lead to more hunger and suffering, as well as doing next to nothing to reduce carbon dioxide emissions," commented one campaigner close to the global organisation, Friends of the Earth. "Politicians must act responsibly and change course on this disastrous transport policy." Instead, he maintained, they should do more to double the fuel efficiency of new cars.